I had a business trip late last week, so I used the plane flight home to read The Sages, by Charles Morris. It includes three short sketches of Warren Buffett, George Soros, and Paul Volcker, wrapped around the thesis that the recent financial crisis showed the importance of pragmatism and experience rather than sophisticated financial models. Obviously I’m just grabbing a couple of passages here that I found interesting.
Here’s Soros (pp. 42-43):
“I am a man of the markets, and I abhor bureaucratic restrictions. I try to find my way around them. … But I do believe that financial markets are inherently unstable; I also recognize that regulations are inherently flawed: Therefore stability ultimately depends on a cat-and-mouse game between markets and regulators. Given the ineptitude of regulators, there is some merit in narrowing the scope and slowing down the rate of financial innovations.”
And here’s Volcker (p. 160), as paraphrased by Morris:
“He scoffed at the notion that clamping down on banks, hedge funds, and other players would stifle ‘innovation.’ The only innovation that real people cared about for the previous twenty or thirty years, he said, was ‘the automatic teller machine.'”
By James Kwak